BILL NUMBER:S3751

TITLE OF BILL:

An act
to amend the banking law and the
civil practice law and rules, in relation to the rate of
interest to be paid upon judgments and accrued claims

PURPOSE:

This bill would bring the legal rate of interest on judgments in line
with market rates.

SUMMARY OF PROVISIONS:

This bill would add a new section 7-A to the Banking Law, and amend
section 5004 of the Civil Practice Law and Rules to establish the
interest rate paid on judgments at the weekly average one year
constant maturity treasury yield, capped at 9 percent.  This is
the same standard used by the federal government.

JUSTIFICATION:

This bill would provide for the legal rate of interest on judgments to
be linked to the prevailing market interest rate in lieu of the
              

current 9% fixed rate. The 9% rate has proven over the past twenty
five-years to over compensate plaintiffs to the detriment of
defendants. A floating rate reflective of the market interest rate is
employed. in many sister states and ensures that parties are neither
over-compensated in times of low inflation nor under compensated as is
the case during periods of significant inflation.

This bill would save money for New York consumers who have commercial
judgments entered against them by corporations and other business
entities. Consumers already shoulder an inequitable burden under
present commercial lawsuit practices because, as noted by the New
York State Consumer Protection Board in 1979, consumers as a general
group do not bring suit or raise counterclaims or even appear to
defend against invalid lawsuits due to the costs of retaining an
attorney coupled with their frequent lack of knowledge regarding
their rights.

The current 9% interest rate significantly adds to the consumers' cost
burden when they are confronted with a judgment against them.
Reducing the 9% interest rate to the prevailing market rate would
reduce the financial burden on such consumers.

Passage of this bill will also help reduce the burden imposed by an
overly generous tort system. Many of our sister states have enacted
comprehensive tort reform thereby attracting business development and
New York simply cannot afford to retain rules which result in
windfall recoveries in tort cases. In fact, based on the November
2009 figures for New York civil jury verdicts as reported by New York
Jury Verdict Review & Analysis, the current interest on New York
verdicts after 30 days from verdict is $9.8 million.


Using the current market interest rate would result in a savings of
approximately $9.5 million in New York's civil justice system. Such
further results in lower costs of both doing business and living in
New York. Moreover, the State alone would save $2.6 million under
this bill; and New York City would save $1.5 million

LEGISLATIVE HISTORY:

This is a new bill.

FISCAL IMPLICATIONS:

None Noted.

EFFECTIVE DATE:

This act shall take effect immediately.